Vertical Research analyst Chip Dillon attributes the selloff in containerboard stocks to comments from Domtar's (UFS) CEO that he is considering converting some of the company's existing uncoated free sheet capacity to kraft linerboard. Dillon views this as likely a negotiating tactic by Domtar, which does not plan to "roll over" and may be setting up to discuss a sale of assets, a joint venture or possibly even a sale of the company. Dillon recommends buying Domtar and International Paper (IP) on this dip, and also likes WestRock (WRK), KapStone (KS) and Packaging Corp. (PKG), he tells investors in an intraday research note.

Jefferies analyst Philip Ng said Packaging Corp. (PKG) is adding 1% of supply by late 2018 with its purchase of West Coast box assets and plans to convert one of its Wallula mills to produce kraft linerboard, which does not change his view on the tightness of the linerboard market. He would view the pullback in Packaging Corp. shares on the news as a buying opportunity and would use the pullback in peers International Paper (IP) and WestRock (WRK) to add to positions as well, he tells investors. Ng keeps a Buy rating and $128 price target on Packaging Corp. shares, which fell about 3% to $106.51 yesterday.

Jefferies analyst Philip Ng said yesterday afternoon that his industry indicated Georgia Pacific announced a $50 per ton linerboard price increase and $60 per ton medium increase. The analyst expects the rest of the industry to match the increase in the coming weeks. A full $50 per ton containerboard price increase would boost earnings by 25%-plus for International Paper (IP), WestRock (WRK) and Packaging Corp. (PKG), the analyst points out. The stocks rallied yesterday afternoon as news of the Georgia Pacific price increase made the rounds.

Deutsche Bank analyst Debbie Jones confirmed that some of her contacts have been informed of a price hike from Georgia-Pacific with an implementation date of October 9. The increase is reportedly for $50 per ton on krafliner and white top and $60 per ton for medium, Jones tells investors in a research note. The analyst expected an increase to be announced later this year for implementation in early 2018, but thinks investor expectations were more mixed regarding the potential for a fall hike. Jones is not aware of any producers following the hike, but expects more announcements this week. To be successful, International Paper (IP) and WestRock (WRK) would also need to raise prices, Jones contends. She believes a successful price increase would be beneficial for International Paper, KapStone (KS), Packaging Corp. (PKG) and WestRock.

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